Idk, really how much more could have been fit in.
If you consider how buggy things are as is, imagine if they had mathematics cities bigger too
I do think this could be a area where consoles constrained the design.
(not a flame, I play on ps3)
Had they used proper occlusion technology and not such outdated rendering techniques or used the very, very simple solution of dividing the city into cells (like the gameworld's more seamless cells or, preferably, like the cities themselves and their own completely separate cells divided by a loading screen; the Imperial City in Oblivion is a prime example of this method), this can easily be bypassed. If push comes to shove and they can't use those very viable solutions (the latter being much easier), then tell them to stop pushing the damn hardware too much on graphical fidelity. Gameplay first, graphics second. Design the game with a goal in mind and if you can't figure out basic methods of putting together the technical aspect, then do the simple/sensible thing and don't squeeze the hardware until it crumbles and content/design cut simply for shiny graphics. Arena and Daggerfall were on far more limited hardware, yet had far larger cities. Why? They maintained their design vision instead of trading it in for graphical effects.